Shares of French telecom companies moved sharply lower on Monday after merger talks between two of the sector’s biggest players failed, dashing hopes of ending a price war that has hurt profits.
Negotiations over Orange SA’s planned takeover of Bouygues SA’s telecommunications unit ended late Friday amid disagreement with the French government over the deal’s €10 billion ($11.38 billion) valuation and the terms of a breakup fee. Orange is 23% owned by the French state.
A source close to the talks told Reuters the talks broke down because of “the general attitude of the French state.”
Shares of Bouygues slumped 14% in early Monday trade, setting them on track for their biggest one-day percentage loss since September 1998. Orange shares slid 5.1%.
The merger would have reduced the number of players in the struggling French telecom sector to three from four and was hoped to prop up profits. Margins have been depressed in the industry since low-cost operator Iliad entered the scene and triggered a fierce price war.
Iliad shares tumbled 13% on Monday, while those of the fourth player, Numericable sank 14%.
Source: Market Watch